Planning ahead for the distribution of your estate will ensure
your wishes are followed, and help keep your loved ones out
of court -- and away from each other's throats -- after you
die.

Katherine Vogt
AMNews

Your
prized porcelain figurine could become a divisive force in
your family, pitting siblings against each other, if you don't
have a will.

And
if the language in your will is vague, the $49 statuette could
become the center of expensive litigation costing your heirs
thousands of dollars as they battle for its ownership after
your death.

"Some
of the biggest fights I've seen in my practice were over knickknacks
and china cabinets," said Les Kotzer, a wills and estate
attorney in Toronto. "It sounds petty, but these things
destroy a family."

Experts
say basic estate planning can help avert major family feuds
that erupt over even the slightest ambiguity about the wishes
of a deceased relative. Whether it's choosing how to distribute
assets among heirs, designating an executor of the will or
bequeathing wealth to charity, the decision must be weighed
carefully and properly documented, they say, or it can cause
long-lasting rifts.

Without
a will or other beneficiary arrangement, assets end up in
probate court and are distributed to surviving relatives through
a state formula and legal proceedings that identify heirs
and value property. Though the process can pass assets to
heirs, estate planners often recommend that clients with larger
estates, like those of many doctors, use a will or a trust
to distribute their wealth in a more precise, faster and perhaps
tax-advantaged way that also may protect their assets from
creditors.

"Generally,
physicians' estates are larger, and that brings added planning
needs. And they are more exposed than most people to lawsuits,
so then the size of their estate and extra exposure makes
them more in need of asset protection than most people,"
said Mike Janko, executive director of the National Assn.
of Financial & Estate Planning.

Jerome
Melchior, MD, a 60-year-old urologist in Vincennes, Ind.,
already has gone through the estate planning process twice
and expects to update his plan again sometime soon.

"My
father died when I was a senior in high school. I wanted to
make sure that if such a catastrophe happened in our life,
my family would be well-protected," Dr. Melchior said.

Dr.
Melchior's first plan was drawn up while his children were
still in preschool. He appointed a guardian for them in the
event that he and his wife died. About 10 years later, he
changed the plan because he had more property and tax laws
had changed.

His
current plan includes using several different trusts. He expects
to tweak it soon, now that his children are adults.

"To
do estate planning and to do a will means you have to recognize
that you are going to die. And a lot of people don't like
to see that as a possibility. Certainly we as physicians see
it more than most. But we as physicians put off things like
that more often than we should," Dr. Melchior said.

To
get started, Janko recommends getting professional advice
from a financial planner or accountant. Without it, a person
would have to do considerable research and paperwork to properly
create a plan. He said an attorney also should be involved
at some point to review legal documents.

Once
a dialogue is opened with a professional and basic facts about
the family and assets are determined, Janko said the first
decision would be whether to rely on a will or to create a
trust.

A
will can designate how assets should be distributed after
the debts of the deceased person's estate are paid. It also
can designate guardianship for any minor children left behind.

Most
wills appoint an executor who is in charge of settling the
estate, paying debts and distributing assets. Kotzer warned
that being an executor requires a great deal of responsibility,
and permission should be asked before naming someone an executor.
He said the role can be shared, so parents may want to consider
appointing all of their children as executors to avoid causing
hard feelings.

For
people with smaller estates, a will may be an adequate vessel
for distributing assets, and probate court may be avoided.
But probate still may be required even with a will if the
estate includes property that is titled in the deceased person's
name.

"That's
lengthy and expensive; it's an open invitation to lawsuits
and claims of all types, and it's public information, so most
people like to avoid probate. And a trust will help do that
really nicely," Janko said.

A
matter of trust
Leigh-Alexandra Basha, a tax and estate planning attorney
in Vienna, Va., said wills are good companion documents to
trusts, providing a safety net to properly direct the distribution
of any assets that were excluded from the trust.

Two
main kinds of trusts -- revocable and irrevocable -- are commonly
used in estate planning. Both are legal arrangements created
to hold assets for designated beneficiaries, which could be
people or charities. The trusts can contain anything from
stock portfolios to real estate. Different types of trusts
have different tax implications.

A
revocable trust allows the person who created it to maintain
control of its assets during his or her life, meaning assets
can be moved and the trust can be changed, amended or revoked.
These trusts are considered ideal for people who want the
privacy benefits of a trust while keeping control of the property.
But revocable trusts do not provide asset protection from
creditors.

For
that, an irrevocable trust can be used. These trusts generally
cannot be amended or revoked, and assets within them are off-limits
to creditors. For physicians who may be concerned about malpractice
lawsuits, the asset protection may make irrevocable trusts
an attractive tool.

Janko
said trusts in general provide flexibility about how wealth
is distributed after death. For example, a trust can hold
onto assets for periods of a time, allowing young heirs to
mature before inheriting any money.

Robert
Brown, an estate planner and attorney in St. Louis, recommends
trusts for higher-income clients. He said trusts can be more
expensive than other estate planning tools -- a basic one
costs about $1,300 compared with roughly $400 for an average
will -- but they also have advantages. The key to making them
work, he said, is ensuring that the assets they hold are titled
properly.

"We're
forever amazed how many people put a lot of time into the
whole estate planning process, then no one follows through
to title the assets and make sure what they want to happen,
happens," Brown said.

Most
assets up to a certain limit are exempt from being taxed after
a person dies, meaning the heirs shouldn't have to pay taxes
on property left behind. The limit is $1 million this year,
but anything on top of that can be taxed at a rate of 49%.
The limits and rates are scheduled to change through 2010.

John
Frantz, MD, an internist in Monroe, Wis., has his estate set
up so his heirs won't have to worry about what is left over
when he dies. His goal is to get the value of his estate as
close to zero as possible while he is alive, depleting but
not outliving his nest egg.

"My
guiding principle in estate planning is to arrange for my
estate to self-destruct, so it's all over when you're done.
Meanwhile, you've got more to play with," Dr. Frantz
said. "You tell your heirs that you've got your estate
rigged up to be more generous."

Dr.
Frantz advocates using annuities and charitable remainder
trusts to maintain income while giving away wealth. He also
grants interest-free loans to charities, which gives him the
option of calling in the money if he needs it while he is
still alive. "It destroys the income," so it has
tax benefits, he said. "And you're providing it to a
charity that you want to support."

Dr.
Frantz and his wife -- also an 80-year-old practicing internist
-- have picked each other to take charge of the estate if
the other becomes incapacitated. The role is called a durable
power of attorney. Dr. Frantz said their children were fine
with the decision. "They don't live nearby and were just
as glad we didn't pick them."

Experts
say designating someone to have durable power of attorney
is a critical choice because in the event of incapacity, the
appointee will have access to and control over everything
from tax returns to payment of medical reimbursements.

A
similar role is assigned by designating a medical power of
attorney, which varies in different states. The appointee
carries out a person's medical decisions in case of incapacity.

"Oftentimes
the individual you would choose for a medical power [of attorney]
would be very different [than a durable power] because you
would want different qualities and characteristics,"
said Basha, the tax and estate planning attorney. "I've
had clients whose kids say, 'I don't feel comfortable knowing
I pulled the plug on Mom or Dad. Don't ask me. I can't do
it.' "

She
said it was important to have an attorney draft the documents
that grant powers of attorney so they can survive any legal
challenges. She also said it was important to update the documents
at least every three to five years to ensure their legitimacy.

Updating
the plan
Updating the estate plan every few years can help ensure that
names on titles are correct and all property is catalogued.
Basha said updates are especially critical following a divorce
because the former spouse's name might remain on some assets.
Those items that were owned in joint tenancy by a couple go
to the surviving spouse after the other's death unless they
have been retitled.

"Maybe
everything was OK when Dad was around, but you take him away
and suddenly Dad's children don't get along with Dad's wife,"
she said. "If everything has been done and is in place,
that's the best legacy the parent can leave the children.
It's to have cared enough to put their own fear of mortality
aside, to sit down and say my children won't have to pick
up the pieces of this mess."

Basha
said estate plans succumb to legal challenges when people
try to do them "on the cheap." She knew a man who
went to Bolivia to do his estate planning because he thought
it would provide savings. Instead, after his death, his estate
racked up a fortune in costs going through probate in the
United States.

But
challenges can arise to any estate, especially if heirs feel
confused about the wishes of the deceased person, said Kotzer,
who co-authored the book, "The Family Fight: Planning
to Avoid It." He recommends cataloguing personal belongings,
possibly even videotaping them, so they can be easily itemized
and directed properly after death. Also, he said it can be
helpful to leave directions for heirs about where to find
important documents and other belongings such as keys.

Deb
Harper, MD, a pediatrician in Spokane, Wash., said she and
her husband periodically talk to their children about the
choices they have made regarding estate planning.

"It's
certainly important within my family not to have living members
fall out as a result of squabbling over something that's left
in the estate," Dr. Harper said. "That's one of
the reasons we go over this pretty regularly.